USD/JPY jumps 100 pips to mid-134.00s on BoJ status quo, Governor Ueda eyed

• USD/JPY as BoJ matches market forecasts of keeping monetary policy, rates unchanged.
• BoJ keeps YCC band unchanged but tweaks forward guidance.
• Yen traders keenly await Governor Ueda’s first press conference, economic outlook amid hawkish bias.
• US Core PCE Price Index also appears important ahead of next week’s FOMC.

USD/JPY rallies 100 pips to 134.45 on the Bank of Japan’s (BoJ) inaction during early Friday. Although the Japanese central bank matches most market expectations by keeping the monetary policy unchanged, an edit in the forward guidance seemed to have fuelled the Yen pair.

That said, the BoJ held benchmark interest rates unchanged at -0.10% while also defending the latest 0.50% band of the Yield Curve Control (YCC), as expected. However, the BoJ also said that they will take additional easing steps without hesitation as needed while striving for market stability, which in turn propels the USD/JPY prices of late.

Also read: Breaking: BoJ steers policy on a steady course, USD/JPY jumps

Given the central bank officials’ latest defense of easy money policy matching the monetary policy inaction, the USD/JPY prices rise after the announcement.

However, challenges to sentiment emanating from the First Republic Bank (FRB), US debt ceiling expiration woes and hawkish Fed bets led by recently upbeat US inflation signals seem to prod the USD/JPY pair buyers.

It’s worth mentioning that the recent escalation in the geopolitical fears surrounding China also weighs on the sentiment and the USD/JPY prices. Earlier in the day, China’s Envoy to Japan said, “The issue surrounding Taiwan is a red line that should not be crossed.”

While portraying the mood, the S&P500 Futures remain directionless around mid-4,100s after rising the most in 1.5 months the previous day whereas the US Treasury bond yields remain lackluster following a notable recovery in the 10-year and two-year bond coupons in the last two days.

Having witnessed the initial reaction to the Bank of Japan’s (BoJ) monetary policy announcements, the USD/JPY pair traders will pay attention to newly appointed Governor Kazuo Ueda’s press conference, scheduled at 06:30 AM GMT. Should the policymaker walks in the footprints of previous Governor Haruhiko Kuroda, the Yen pair may please buyers.

Apart from the BoJ-linked catalysts, the market’s fears of banking fallouts and US default highlight the First Republic Bank (FRB) updates and discussion on debt ceiling expansion as important factors to watch. Additionally, the Fed’s preferred inflation gauge, namely the US Core PCE Price Index for March, expected to ease to 4.5% YoY versus 4.6% prior, could offer more details to aptly predict the USD/JPY pair’s moves ahead of the next week’s Federal Open Market Committee (FOMC) monetary policy meeting.

Also read: US Core PCE Preview: Why this is a lose-lose situation for the US Dollar

Technical analysis

A daily closing beyond the downward-sloping resistance line from early March, around 134.50 by the press time, becomes necessary for the Yen pair buyers to retake control. That said, sellers may tighten control on witnessing sustained trading below a one-month-old support line, close to 133.85 at the latest.